Fundamentals of Economics

11:36 PM Thinker

                                                           MACROECONOMICS

Macroeconomics is the study of economy as whole. It analyze the the cause of major problem such as unemployment rampant inflation , low wages.

Objective of the Macroeconomics policy are achieving:

• High level of output(GDP)
• Full employment
• Price stability
• sustainable Balance of Payment
• Rapid economic growth

GDP-(Gross Domestic Products) Its the measure of the market value of all goods and servic produced by factors -labor,and property- located within boundaries of country,,during specified period of time annual.

GDP

• Nominal GDP -at base price
• Real GDP-adjusted for price change.

Potential GDP-maximum output an economy can produce when it's all resource are fully employed.

GDP Gap-Potential GDP-Actual GDP.

If Actual GDP >Potential GDP- Inflationary output GAP

If Actual GDP<Potential GDP- Recessionary GDP GAP

Objective of macroeconomics is to increase potential GDPmin long run.

GDP =NDP + Depreciation where NDP is National Domestic product

GDP-within boundaries of Country.

GNP-resident of countries either in or abroad.

GDP deflater = Nominal GDP/ Real GDP

GDP deflater measure the price level

% change in GDP deflator is equal to inflation rate during particular period.

Personal Income=NNP at factor cost -corporate tax- unattributable profit – transfer of payment

Disposable income=Personal income – personal taxes

GDP= C+I+G+(X-M)

Where C – consumption

I -Investment

G-Govt expendature

X-Export

M-import

X-M- net export

Instruments of Macroeconomics polices:

• Fiscal Policy
• Monetary Policy
• Exchange rate policy
• International Trade policy
• Employment Policy
• Price and Income Polices

Objectives                                                                       Tools/Instrument

• High output level                                                     Monetary Policy
• Low unemployment rat                                            Fiscal Policy
• Stable Price level                                                     Exchange Rate policy
• Maintenance of Balance of Trade Payment               International Trade policy
• steady Economic growth                                          Price and income policy

                                                                                        Employment policy